Loonie comes alive
USDCAD is on the move. It languished on the sidelines for four days, locked in a tight 1.3280-1.3360 range, but that changed this morning.
Sterling rocked higher when Bloomberg reported a Brexit deal might be in the works, and GBPUSD rallied from 1.2942 to 1.3051 in a heartbeat. European Union Chief negotiator Michel Barnier apparently told an audience in Slovenia that a deal could be reached within eight weeks. That news follows an earlier story in the Financial Times that suggested that EU officials would be giving Barnier instructions to close the Brexit deal. However, the Irish border issue hasn’t been resolved, which helped to cap the GBPUSD rally.
Trade is a popular theme today. President Trump hasn’t backed off his threat made on Friday that China tariffs were ready to go. China said they would retaliate. Wall Street seems a tad bored with that narrative as evidenced by this morning’s gains in the DJIA, S&P500 and Nasdaq which are modestly higher. Apple (AAPL) is down 1.5% thanks to Trump’s weekend comments that if the company wanted to avoid tariffs, it should move production stateside.
USDCAD is rangebound but with a bid. The US/Canada trade talks took on more urgency over the weekend. Three senior US administration officials led by White House Economic Council Director Larry Kudlow were demanding an end to Canada’s dairy supply management program. Previously, Prime Minister Trudeau promised not to sign a Nafta deal if it involved having to give up the programme. Making matter’s worse, President Trump promised “ruination” for Canada and 25% tariffs on cars if a Nafta deal wasn’t completed.
The US dollar retreated since the open, fueled by gains in GBPUSD and the modestly positive tone to riskier assets that gains on Wall Street imply. A lack of actionable US economic data and profit taking following Friday’s nonfarm payrolls-fueled rally is helping.